Posts Tagged ‘Dalal Street’

“Who says no one listens to Dr Manmohan Singh? The bears do. Ever since the Prime Minister of India ordered Indians to release their animal instincts, the bears have started a carnival on Dalal Street.

“Maybe the instructions of our first economist-PM got mislaid in translation. He surely wanted bulls to march across Mumbai, conquering every stock exchange in an exhilarating stampede. Instead, horrible little bears arose from long hibernation, and turned into a wrecking crew that has left the economy gasping and government choked.

“In the meantime, picking up on another variation of the animal theme, the Indian rupee has turned into a truant chimpanzee, sliding down with pathetic glee and jumping up with an occasional wheeze, but quite certain that its destination is downhill.

“If the great Indian animal farm of 2013 seems out of control, it is because the keepers have lost the map as well as the plot. The economy is only one casualty of self-generated mayhem. The political stability of India is equally a shambles.”

Nearly half a dozen English channels and a couple more in Hindi cover India’s stock markets. Another half a dozen English newspaper catch its every cough and sneeze. The treasury benches exult if the index rises; the opposition benches exult if it falls.

Signals on the state of the overall economy are read from tea leaves on Dalal Street. On budget day, the dalals in grey suits give marks to the honourable finance minister. Fear and greed are supposed to drive it. Its scams stars (Harshad Mehta and Ketan Parekh) are legends.

Gordon Gekko is god.

But what really is the state of the Indian capital markets, after 20 years of economic liberalisation and market development?

“Narrow, shallow, illiquid and concentrated in the hands of a few individuals located in a few centres…. A casino frequented by a small closed club,” is the clear-eyed verdict of Sucheta Dalal’s personal finance magazine, Money Life.

In unstarred question number 1669, BJP member Sukhdev Singh Dhindsa asked the finance ministry for details. On August 10, Minister of state for finance, Namo Narain Meena, provided the answers. They are little short of eye-popping in a nation of 18 million plus a billion:

# No. of investors who traded on the National Stock Exchange’s cash market in the first quarter of 2010 (April-June): 30.90 lakh

# Retail investors, high networth individuals and corporate customers who traded in this period: 52%

# Institutional investors and proprietary traders who traded: 48%

In other words, the big bogey about institutional investors, Indian or foreign, is a big bogey. Truth is retail investors are more in number in institutional investors, although their quantum of participation may be smaller.

# Of the 30.90 lakh investors, 90% of the trading in the April-June quarter came from a grand total of 192,200 investors

# 80% of the turnover came from 41,654 investors

# 1,50,546 investors (that is 78% of the 30.90 lakh investors) accounted for 10% of the trading turnover

# 50% of the trading turnover came from 451 traders, of which 156 were proprietary traders.

***

The numbers are equally dismal in the much-vaunted derivatives segment which saw trading of Rs 58,31,715 crore in the first quarter of the current financial year. In response to question 1692 from Mohammed Adeeb, the minister revealed:

# Only 5.75 lakh clients traded in derivatives in the three-month period

# Of these, 90% of the trading came from 18,035 players. Meaning 97% accounted for 10% of trading, while 3% accounted for 90%

# 2,188 investors accounted for 80% deriatives turnover

# 537 investors accounted for 70% of trading

# 223 investors accounted for 60% of trading, of which over half were proprietary brokerage firms

# 50% of NSE derivatives trading came from just 106 investors, of which 58 are proprietary traders

# 67% of all tansactions in the derivatives markets are by day-traders

E.R. RAMACHANDRAN writes: I happened to run in to Nanubhai on Dalal Street. He was eating Khaman Dhokla in a farsan shop.

“Khem cho, Nanubhai?”

“Saru che.”

He was looking glum but gestured me to join him.

As I bit into the tasty dhokla with tangy chutney on the Friday afternoon, which was fast turning into a ‘Manic Friday’ as per Dalal Street lingo, he was staring at the bull near the entrance, which overnight had become a Russian bear hugging everybody that passed the Street.

Nanubhai is a well-respected Dalal Street dada with an answer to every shareholder’s query.

“What went wrong with Lehman Brothers?” I asked.

“Lots of things. If the founder brothers, Henry, Emanuel and Mayer were alive this wouldn’t have happened. Lehman Brothers were more than a 150-year-old company. But yet, it had no Lehman in the company. Such a situation can never happen in India.”

“Are you trying to tell me an Indian would have handled this differently?”

“Bilkul. If it was an Indian firm, Lehman Brothers would have fought as soon as their father died and divided in to three companies. They would have diversified into clothing, polystyrene, petrochemicals, vegetables, movie making, telecom, drilling oil, mobile phones, retailing, books, spectacles, gyms, wellness. In short, anything and everything under the sun. They would have made money for themselves and their shareholders.”

“But when there is massive failure there would be no option but to file for bankruptcy?”

“Fail-wail chance hi nahin! Even if they encounter tough times, they would have friends like Mulayam Singh and Amar Singh to bail them out. They could finish off competition by befriending the finance minister and getting duties levied on the imports of competition. They would fund and befriend ruling parties. Unfortunately for Lehman Brothers in 2008, without a Lehman on the board or some Indian business brothers at the top, they couldn’t open the survival kit to stay afloat.”

As we were sipping double khadak chai, I asked: “Did anybody anticipate this global meltdown?”

“Anticipate? Mazak chodo! I will tell you something. America has some 45 Nobel laureates in economics from 1970. From 2000 alone there are 15 Nobel laureates in econometrics sitting on company boards, treasury benches and in places like Harvard, Stanford etc. Kisiko kuch patha nahin tha! How come none of these had any inkling to the disaster awaiting the banking circles all over the world? Even the finance ministers of G-7 talked of strong “fundamentals” of world economy around this time last year! Two months back the only topic they were discussing was the rise in oil prices.”

“What will happen if it goes all on like this?”

“Some American economist will study this, write a new a theory and get Nobel Prize next year, dekhna. Seriously, they forgot things like control, double check, systems-in-place etc and brought in vague words like Subprimes to give loans left, right and centre.”

“What will happen to the Indian market?”

“It’s already having the Lehman Brothers’ effect. Our finance minister seems to like the figure 60,000. While presenting the budget earlier in the year he pledged Rs 60,000 crore to write off loans given to farmers. Now he is pumping Rs 60,000 crore to help out the banks! I don’t know what he will do next. He is again from Harvard!”

“What is the lesson to be learnt from the Lehman Brothers’ episode?” I asked as we were leaving.

Nanubhai took a spoonful of saunf and said: “You know, we have an old elementary rule for keeping hisab-kithab. Divide a page into ‘Left’ and ‘Right’ with a line in the middle to denote Debit and Credit. In case of LB, as somebody said, nothing was right in the ‘Left’ and nothing was left in the ‘Right’,” concluded Nanubhai.